Will today's workers be able to retire comfortably, if at all? Traditional pensions are quickly becoming a thing of the past, as corporations reduce or eliminate them to save costs. Some workers lost their retirement security to corporate scandals and declines in the stock market. Social Security may not provide an adequate safety net when today's younger workers approach retirement.

Will today's workers be able to retire comfortably (or at all)? Traditional pensions are quickly becoming a thing of the past, as corporations move to reduce or eliminate them to save costs. Some workers have lost their retirement security through corporate scandals and stock market declines. Social Security, designed to be the ultimate safety net, may no longer exist in its current form when younger generations of today's workers approach retirement.

Pension Plights: Less than one-half of the private workforce is covered by any kind of private pension or savings arrangement. And more than one-half of employers who provide pension benefits report changes and cuts in 2004 in those plans. The most common change is to terminate traditional defined benefit plans and provide 401(k) plans, which puts the burden on employees to properly plan, save, and invest for retirement.

Insufficient Pension Benefits Means Workers Will Have to Work More Years: Many older Americans say they will continue to work into theirs 70s and 80s, well past the normal retirement age of 65. The majority of older workers and retirees say that higher health-care costs, insufficient retirement funds and recent investment losses mean they need to keep earning money. (Reuters, Los Angeles Times, September 23, 2003.)

Corporate Rip-offs of Worker’s Pensions: The retirement savings of thousands of employees were lost when major corporations like Enron, WorldCom?, and Lucent went bankrupt because of malfeasance of the corporations themselves. These and other corporations assured employees that they would have secure retirement income if they invested their 401(k) money in their companies' stock. When the companies stock tanked, employees lost millions of dollars. While the employees have filed lawsuits against company officials, most will not recover what they lost. And the same financial devastation could hit thousands of other workers.

Pension Plans are Severely Underfunded: US employers have seen the shortfall on their pension plans almost double to a record $300 billion over the past year. 270 US companies had reported deficits of more than $50 million thanks to declining stock markets and "ballooning" liabilities - more than treble the previous record. Last year the PBGC paid out a record $11.3 billion, turning a $7.7 billion funding surplus into a $3.6billion deficit. (Norma Cohen, Financial Times, London, March 12, 2003.) State taxpayers are having to spend billions of dollars to prop up public pension plans hit hard by stock market losses, which squeezes state budgets at a time when tax collections are growing slowly. Although it's not unusual for pension funds to struggle in economic downturns, the problem is more urgent now because the first wave of baby-boomer retirees is expected in just seven years. (Dennis Cauchon, USA Today, August 4, 2003.)

Conversion of Traditional Pension Plans to Cash Balance Plans: The conversion of cash balance plans has destroyed the retirement security expectations of thousands upon thousands of older American workers. Unfortunately, there is little in the law to prevent an employer from breaking the implicit promise of defined benefit plans: that the greater part of retirement benefits are earned in the latter part of an employee’s career. Cash balance plans purport to be defined benefit plans but do not behave like traditional defined benefit plans. Defined benefit plans were created to accommodate firms that wanted to provide employees with an annuity benefit at retirement age, which is what traditional defined benefit plans do. Cash balance plans, on the other hand, are generally designed to provide employees with a lump sum benefit on retirement. To date, most of the discussion of the problems of cash balance plans has focused on conversions and their corrosive effect on the retirement security of older working Americans.

Minorities hit even harder: Only 59% of African-American? workers and 50% of Latino workers indicated they have saved money for retirement, significantly less than the 71% of all Americans in the workplace. Minority workers are less likely to be offered access to 401(k)s or other retirement savings plans by employers. Latino workers, many of whom are part-time or short-term workers, were least likely to have employer-sponsored retirement plans. (Jill Nelson, USA Today, September 26, 2003.)

Social Security: A Handkerchief, Not a Safety Net: Will the Social Security system will have sufficient funds to pay benefits to future generations of retirees? Social Security faces the long-term problem of making more benefit payments to greater numbers of retirees that exceed the contributions the system receives from fewer workers in the system. The number of people receiving Social Security retirement benefits is growing faster than the number of workers paying taxes to support them - the number of retirees between now and 2050 will increase 100% while the number of workers will only increase by 22%. Workers continue to pay Social Security taxes but many seriously doubt that the system will provide benefits to them when they retire. This is the broken promise confronting Generation X and future generations.

Reformists say Social Security simply costs too much and pays too little to be a good deal for any worker, but it is a particularly bad deal for low-wage workers who depend on it most. Social Security was designed to supplement private savings for retirement, but many workers, particularly low-income workers, don’t have the money to set aside for retirement savings after paying Social Security taxes. How big a pill will Americans swallow to ensure Social Security benefits will be there for future generations?